International Capital Holding Corp. and Subsidiaries - Page 5




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          credit from Bank South, which provided funds to acquire Norcom              
          and a line of credit for working capital.  Mr. Arnold personally            
          guaranteed the Bank South loan.  Additionally, Messrs. Arnold and           
          Lombardi each lent small amounts of cash to ICHC to help NCAC               
          acquire Norcom.                                                             
               The loan agreement with Bank South included numerous                   
          restrictions on Norcom’s activities, two of which are relevant to           
          this case.  First, the loan agreement prohibited Norcom from                
          declaring distributions without the bank’s approval.  Second, the           
          aggregate amount of compensation Norcom could pay to its officers           
          and directors was restricted to 110 percent of the prior year’s             
          total.  In early 1990, Norcom requested and was granted a waiver            
          of these restrictions for Norcom’s fiscal year that ended on                
          January 31, 1990.  Norcom requested a waiver of the restriction             
          on distributions because it had declared a $1.6 million dividend            
          in August 1989.  At least a portion of the dividend was requested           
          by Bank South so that another member of the affiliated group,               
          RDI, could pay off a loan from Bank South, which RDI did not have           
          the ability to pay.  This was the only dividend Norcom declared             
          from 1987 through the end of 1996.                                          
               In February 1991, LaSalle National Bank replaced Bank South            
          as Norcom’s primary lender.  LaSalle provided Norcom with an                
          extension of credit in the amount of $23.5 million.  Mr. Arnold             
          personally guaranteed at least $2 million of this debt.  Like the           






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